Finance Division rebuts Ahsan Iqbal, says IMF program is whole-of-government, not Finance alone

ISLAMABAD:The Finance Division on Monday issued a point-by-point rebuttal to Planning Minister Ahsan Iqbal’s criticism of its handling of the IMF program, stating that the program is a whole-of-government effort and not under the “tight control” of the Finance Ministry.

The clarification came after Ahsan Iqbal sought Prime Minister Shehbaz Sharif’s intervention to include his ministry in parleys with the International Monetary Fund, saying the $7 billion programme is not just about numbers but about people and economic development.

What Ahsan Iqbal said:

At a news conference launching the Monthly Development Outlook on Monday, Iqbal said he has recommended to the prime minister that a representative of the Planning Commission should also be included in the team that will negotiate with the IMF.

“We have officially communicated to the PM in writing to include the Ministry of Planning as part of the team, along with the Ministry of Finance, for holding negotiations with the IMF because broader discussions on the economy, including growth, inflation, poverty and others, are the domain of our ministry,” he said.

The remarks underscore criticism from government circles and independent experts about viewing the financing facility only in relation to fiscal numbers. The finance ministry has kept a tight control over the programme design and negotiations, which caused problems such as commitments about the agriculture sector and focusing too much on fiscal stabilisation.

Iqbal also said the finance ministry has made petroleum levy the central point of the programme, although there is no explicit condition in the IMF document about the rate of the levy. As a result, the government has managed to improve fiscal numbers but it fueled inflation, unemployment, poverty and low economic growth.

Finance Division’s response:

In its rejoinder, the Finance Division said the characterization does not accurately reflect institutional arrangements.

“IMF’s EFF and RSF facilities encompass reforms and commitments falling within the mandates of multiple federal and provincial institutions, including Finance Division, Planning Commission/Ministry of Planning, Ministry of Energy, provincial governments, FBR, SBP and other relevant stakeholders. Concerned ministries and institutions participate and lead technical discussions, including benchmarks setting relating to their respective mandate.”

The Division said the program is demonstrably not confined to ‘numbers’ or fiscal targets. It fully recognizes that macroeconomic stabilization is a mean towards sustainable and inclusive growth. The published program explicitly encompasses growth-enhancing structural reforms, social protection, governance, energy sector efficiency, climate resilience and reduction of distortions. The latest IMF staff report specifically states that policy discussions focused on accelerating reforms to support stronger growth, while protecting vulnerable households.

On Petroleum Levy (PDL), the Division said calling it the “central point” is misleading. The fiscal strategy revolves around FBR revenue mobilization, expansion of tax base, provincial taxation, expenditure rationalization. For FY27, the program specifically emphasizes additional revenue mobilization and strengthening FBR performance rather than relying solely on petroleum taxation.

It added that the claim of ‘no IMF conditionality relating to petroleum levy pricing’ is technically narrow. Published program documents contain explicit details concerning petroleum pricing and levies, including alignment of domestic fuel prices with international prices through regular adjustments. The RSF also included a specific reform measure introducing a supplementary carbon levy through the PDL framework. Thus, petroleum pricing policy forms part of the agreed program framework.

Linking PDL directly to inflation, unemployment, poverty and low growth is analytically incorrect, it said, as outcomes reflect geo-political situation, commodity prices, exchange-rate movements, monetary conditions, fiscal imbalances, external financing constraints and global shocks.

The Division said fiscal stabilization cannot be separated from growth. Pakistan entered the program with limited buffers and significant financing requirements. IMF’s third-review documents record that fiscal consolidation contributed to reducing imbalances, supported disinflation, external-sector stabilization through reserve build-up and recovery in overall growth numbers.

It also said consolidation was not pursued without social safeguards, citing explicit floors for BISP targeted cash-transfer spending, inflation adjustment of unconditional benefits, and the latest targeted fuel-subsidy program on direction of the Prime Minister to protect vulnerable households through targeted, temporary and fiscally sustainable interventions, rather than untargeted subsidies. Sovereign debt growth last financial year was limited to lowest levels in two decades, it added.

On agriculture, the Division noted that agricultural income taxation is constitutionally and administratively a provincial responsibility, and implementation necessarily involves provincial governments. Any assessment should therefore distinguish between program coordination by Finance Division and implementation responsibilities of respective ministries and provinces.

The appropriate policy debate is therefore not “stabilization versus growth”, but how to transition from stabilization towards sustainable growth without fiscal and external imbalances that necessitated reverting to IMF programs in the past.